We offer a wide range of bonds that include Tax Savings Bonds and Bonds issued by the Central and State Government Institutions like Infrastructure Bonds, Capital Gain Bonds, Tax Free Bonds, RBI Bonds, etc.
NCD issues in both Private Placement and Public offering are available as well.
1. What are Tax Free Bonds?
Answer: These bonds are mostly issued by the government and pay a fixed coupon rate (interest rate). They have a long term maturity of 10, 15, or 20 years.
2. Features of Tax Free Bonds?
3. Can I trade these on the stock exchange? Would there be any tax liability on this trading?
Answer: Tax Free Bonds are listed on the stock exchange and therefore can be traded freely (if held in dematerialized form). While the interest earned from these bonds is tax free, any gain from the sale of these bonds on the stock market is taxable. Short-term capital gain is taxed at normal rates, however, the long-term capital gains are taxed at 10% without indexation and 20% with indexation, whichever is lower, as per Union Budget 2016.
4. Difference between Tax Free Bonds and FDs?
5. What are Capital Gain Bonds?
Answer: These are bonds in which the profit arising from the sale of a property can be invested. These bonds have a lock-in period of 3 years and one can invest in these bonds upto a maximum amount of Rs. 50 lakhs. Currently, these bonds are being issued by NHAI (National Highway Authority of India) and REC (Rural Electrification Corporation Limited).
6. What is the taxation policy applicable on Capital Gain Bonds?
Answer: Capital Gain Tax is levied on Capital Gains received from sale of a long term capital asset. This tax levied can be saved by the seller, if the sale proceeds are further invested in Capital Gain Bonds specified under Section 54EC within 6 months of receipt.
The exemption from Capital Gains is possible only if the asset is sold after being held for 3 years or more. In case the asset is sold before 3 years, them it is considered as short term capital gain and is therefore subject to applicable taxation slab.
The interest earned on Capital Gain Bonds is not subject to tax exemption. The interest earned is treated as part of the annual income and is therefore subject to the taxation slab as applicable for the investor.
The interest earned on these bonds is payable annually and the funds are directly credited to the bank account of the investor.
Rs. 50 lakh is the aggregate maximum exemption allowed under Section 54EC irrespective of the financial year, as per Budget 2014.
7. Can Capital Gain Bonds be used as collateral in a loan? Can I sell these bonds?
Answer: Capital Gain Bonds are non-transferable and non-negotiable. They cannot be pledged or offered as collateral / security while applying for a loan.
No you cannot sell these bonds. Capital Gain Bonds are issued for a period of 3 years and as per Section 54EC, they cannot be sold before these 3 years. These bonds are not listed on the stock exchanges.
8. What are Infrastructure Bonds?
Answer: Infrastructure Bonds are long term investment bonds issued by the government or the government approved infrastructure companies or NBFCs. Funds are borrowed from the investors for utilization in various infrastructure projects being undertaken by the government.
Infrastructure Bonds are long term bonds having maturity periods between 10-15 years. However, an option of buy back is provided by the issuer of the bond after 5 years. These bonds are listed on the stock exchanges, and therefore can be sold after 5 years of purchase.
9. What are RBI Bonds?
Answer: RBI Bonds are the bonds backed by the Government of India. These bonds are issued to raise funds to finance long term lending, economic develop, etc of the country.
These bonds are non transferable and cannot be sold before maturity. The interest on these bonds can be earned either on half yearly basis or on cumulative basis on maturity and is taxable.
10. What are NCDs?
Answer: NCDs or Non Convertible Debentures is the debt paper (debenture) which is issued by a company which wants to raise funds from the public for a specific period of time by paying a fixed interest. They are secured against the assets of the issuing company by way of creating mortgage on the assets.
NCDs cannot be converted into shares and on maturity the principal amount along with the interest earned is credited to the investor Issuance of NCDs by companies are regulated by RBI under Issuance of Non-Convertible Debentures (Reserve Bank) Directions 2010, whereby it is mandatory of the companies to be rated by credit rating agencies and NCDs can only be issued if the companies have a minimum P-2 rating by CRISIL or equivalent rating by other agencies.
However, it is advisable to purchase NCDs of companies with higher risk rating like AAA, AA+, AA- and AA.
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